Meaby & Co. Specialist buy to let property lawyers, London, Camberwell and Chigwell
Why Buy to Let?
There are many reasons why people choose to become buy to let landlords. For some it is a way of generating extra income, perhaps during retirement, for others it is part of a long term investment strategy.
Regardless of whether you are considering becoming a buy to let landlord for the first time or you are extending your portfolio, there are some key considerations you should take into account before investing your time and money.
Landlords at all levels need to give careful consideration to a number of factors such as:
- The best way to fund the purchase
- Finding the right kind of mortgage
- Will the rental income will cover outgoings?
- Managing the property and tenants and
- How the income from the property will affect their position in relation to income tax
Buy-to-let property – it needs to make commercial sense.
A successful buy-to-let strategy relies on the investment making financial sense. Buy to Let investors should focus on the prospects for income, how easily will the property be to let out, the likelihood of capital growth, and the costs that need to covered when the property is vacant. Key factors for but to let landlords to consider include:
- What is the state of the local property market? and the outlook for house prices – speak with local selling and letting agents.
- What kind of tenants are you hoping to attract? Professionals, families or perhaps students? and what are they looking for in a property and it’s location?
- What rental income you can expect to achieve? compare this to your financing and running costs – consider building in a buffer, just in case interest rates were to rise.
- Miscellaneous costs need to be taken in to consideration including maintenance costs and agents’ fees for finding and managing tenants (if required) and the additional rate of stamp duty that applies to second homes and buy-to-let properties
- Void periods when your property is empty and so producing no rental income
When financing the purchase using a mortgage secured on the property, you must arrange a mortgage that allows you to let the property out. Buy-to-let mortgages are widely available, but be aware that interest rate may be slightly higher than a standard mortgage.
Buy to let lenders often impose rigorous conditions. Examples of some of these conditions are:
- A maximum loan to value ratio of 75%
- Be aged over 25
- Have and annual income (excluding the hoped for rental income) of at least £35,000
- This is not your first mortgage
As with any mortgage you should shop around and, if in doubt, take advice from a trusted adviser.
As a buy to let landlord it is important to insure the building and your contents i.e. electrical and white goods, and furniture if the property is let furnished. Landlords need to inform their insurer that the property has been let out. Specialist landlord’s insurance is available and may offer additional protection including cover for landlord’s liability and legal expenses (e.g. if one of your tenants is injured and claims against you).
The Legal Side
Always take legal advice at an early stage, our early assessment of legal paperwork helps you decide whether a property is suitable for investment.
Our specialist solicitors will:
Carry out thorough searches, enquires and reports on title.
Make the appropriate registrations of interest at H.M Land Registry.
Prepare bespoke tenancy agreements and provide advice on regulations for landlords such as multiple occupation obligations and tenancy deposit schemes.
Meaby & Co. has produced a Buy to Let Guide’ which contains a great deal of useful information and you can download it free of charge here.
Please give us a call on 0207 703 5034 or send us an email at email@example.com